Taxing issues for marketing as brand trust is called into question

06 December 12, by
Jane Bainbridge

From the Jimmy Savile scandal at the BBC to Starbucks' and Amazon's tax avoidance, corporate brands are learning that they must recognise public anger and act quickly to avoid repeating their mistakes, writes Jane Bainbridge.

This Saturday, Brixton's Starbucks will become a play centre, while a branch in Newcastle will act as a refuge. This isn't the coffee-shop chain's mea culpa PR exercise to win over an austerity-weary British public, fed up with how little tax it has been paying in the UK, however.

The 'takeovers' have instead been organised by protest group UK Uncut to highlight cuts to women's services because of the country's lack of funds. Starbucks' complex tax structure, which means it pays no corporation tax in the UK, has provided the ideal platform.

With the coffee chain's morality called into question by a parliamentary committee, the US corporation has now bowed, at least a little, to public pressure and conceded that it will look again at its 'tax approach' in the UK. This came after chairman Howard Schultz's blog, intended to 'put the record straight' for UK consumers (he argued that the company paid £160m in various taxes, mainly VAT, but notably not corporation tax) seemingly did not have the desired calming effect on the situation.

According to the Starbucks PR team, the issue of brand image regarding its corporate reputation since the tax story broke is not marketing related and therefore it refused to comment.

However, in an official statement Starbucks revealed it is 'in discussions' with HMRC and the Treasury. 'We have listened to feedback from customers and employees, and understand that to maintain and build public trust we need to do more,' it said.

Starbucks is not alone in fighting to maintain public trust. Numerous companies are being lambasted for their tax avoidance, albeit legal (Amazon and Google also faced MPs' wrath); the BBC has been publicly flayed over its handling of the Jimmy Savile affair and subsequent abuse stories; and media empires such as News International are now facing the fallout from the Leveson report.

In this climate, have brand trust and corporate reputation become something of an oxymoron? And are any of these cases on the Gerald Ratner scale of disaster, or will they 'do a McDonald's' and live on?

When it comes to handling a brand-reputation crisis on the scale faced by these big brands, opinion is unanimous: it needs to be tackled head-on. Chris Arnold, author of Ethical Marketing and the New Consumer, and founder of agency Creative Orchestra, says: 'The power of forgiveness is very strong when you repent. You've got to embrace the situation, confront it fast, and show you're dealing with it. The longer you say nothing, the more damage you do.'

Short-term damage seems inevitable. Starbucks' brand consumer-satisfaction score, according to social media agency Yomego, fell dramatically from mid-October, when it emerged that it had paid no corporation tax in the UK last year (Marketing, 28 November). The BBC's trust ratings have fallen since the Savile scandal broke, and 48% of people surveyed by Conquest believe that the corporation's general reputation will suffer lasting damage (see tables, below).

Do people forget about such cases over time, or is the long-term state of a brand in jeopardy? The BBC remains the most-trusted source of news and information and has responded swiftly to claims made in relation to the Savile scandal, through investigations and high-profile scalps. 'It has taken action, made sacrifices and apologised. We'll forgive the BBC because we love it so much,' argues Arnold.

What of Amazon, Google and Starbucks? Where Starbucks is potentially in trouble, compared with Amazon and 'more so' Google, is the ease of switchability; with a Costa across the road, it is an easy boycott for some consumers to participate in. Whether it is sustained depends on how long the issue remains in the media spotlight, how the brand reacts and how many enemies it makes along the way.

Companies that weather these crises best have usually built up a bank of goodwill over the years. This is something Marc Mathieu (right), senior vice-president of marketing at Unilever, which suffered a near meltdown of its Persil brand in the 90s, believes in strongly.

'In the end, people want to know who is the company behind the brands they like; it is critical,' he says. 'We have made the Unilever brand much more of a visible trust mark, using it on bags (and) ads, creating programmes and making it a trust mark for sustainable living. It's an idea of the past to think that a corporation can be isolated from a brand.'

Bank of goodwill

Marketing has a clear role in the long-term reputation of a brand, but equally, a marketing director cannot be held responsible for how global corporate finance strategy gets played out. So where does that leave them?

Gill Barr (right), group marketing director at The Co-operative, argues that making marketing more powerful would help avoid these situations in the first place. 'This is precisely the reason to have a marketing director on the board. They'll never pick up every wrinkle and nuance, but it's someone in the boardroom who is customer-obsessed.'

Guy Esnouf, head of public affairs at E.ON, has experienced his fair share of flak working in a communications role in the utilities sector. He believes the companies that survive, face the music and admit their mistakes.

'It's fundamental that a company recognises it is part of society, and it can't survive if it doesn't follow society's rules,' warns Esnouf. 'Also, this idea that marketing can act divorced from what the rest of the company is doing is completely wrong; there's no difference between the company and its brand. If there is, you will be found out.'

Even if, or when, tax is no longer in the headlines, the issues surrounding corporate trust will remain. With consumers ever-more emboldened to take to social media to tackle perceived corporate greed - thereby escalating complaints into scandals - marketers would be short-sighted to think that boardroom decisions will not have an impact on their remit as brand guardians.

CORPORATE COMMUNICATIONS VIEW: WHAT SHOULD STARBUCKS DO?

Guy Esnouf, Head of public affairs, E.ON

The question for Starbucks is: 'What's the resolution? How do we fix this?' The first thing is pay your tax; that's the fix.

Is there any other resolution that will work? If there isn't, I'm not sure what percentage tax Starbucks thinks it would pay; is that going to undermine its business proposition of 'come to us for a good, righteous experience' because anyone else's coffee is cheaper?

Do companies calculate this? Yes, they do. But it's not just in terms of 'right, we'll lose 2% of our customers, that's fine'; it's much bigger than that. What's the cost of legitimacy? Next time Starbucks advertises, what percentage of people will turn off?

Far more importantly, would you now go to work for Starbucks? If there's a loss of goodwill from employees and customers, it becomes draining on a company. All these intangibles should be considered.

When the Jimmy Savile scandal broke in October, the reputation of the BBC as a trusted source of news, as well as its role as Savile's employer for the best part of 40 years, was called into question.

In an in-depth consumer survey, which was conducted between 24-26 November, research firm Conquest assessed the potential damage to the integrity and reputation of the BBC brand.

It also gauged the level of respect the public has for the BBC, as well as other companies and institutions, such as Starbucks, Amazon and Parliament, on a sliding scale of 'no respect' to 'completely respect'.

Methodology

Conquest surveyed a demographically proportional base of 307 adults, using its online proprietary methodology Metaphorix. This visual, rather than text-based survey, uses avatars to reflect consumer attitudes and emotional engagement.

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